Mexico's December purchasing managers index (PMI) for
manufacturing jumped to a seasonally-adjusted 54.0, up from 52.3 in
November. The index now stands at its highest level since
July. According to the report, from Banco de México and the
official statistics agency INEGI, the rise in December came
entirely from the heavily-weighted subindexes on new orders and
production. The subindex on new orders increased to 56.1,
after a reading of 54.2 in November. The subindex on
production rose to 57.2, up from 54.1 in the previous month.
In contrast, the subindexes on manufacturing employment and
inventories fell modestly, to 50.9 and 50.7, respectively.
The subindex on supplier deliveries fell sharply to 48.0.
Comment: The PMI is designed so
that readings over 50 point to expanding activity. The report
for December therefore suggests Mexico's manufacturing sector is
growing quite broadly. The Mexican factory sector has been
growing well throughout the current economic expansion, and the
manufacturing PMI has averaged 53.0 over the last two years.
The PMI in December was comfortably above even that robust
level. The strong reading provides added confirmation that
the pullback in activity during November was probably just a
temporary setback caused by global uncertainties. With recent
data suggesting the U.S. economic expansion is finally gaining some
traction, there is a good chance that Mexican exports and
industrial activity will continue to grow well, though not as fast
as early in the recovery. The main risk to the current
expansion is if the European debt crisis gets dramatically worse
again or Asian economic growth slows too much further.
Patrick Fearon, CFA
Vice President, Fund Management